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The Register has a eminently readable explanation of why big banks are considered too big to fail, and get government bailouts after mismanaging their financial situations.
We seem to rage every time this happens, Let them go Bankrupt! seems the cry from the man in the street.
But that is a juvenile approach which will hurt far more people than those few officers miss-managing the bank or its funds. Banks don't have funds. Its all your funds. And if the bank fails, you mostly get nothing.
The article explains just what banks are (for those of you who slept through Econ 101), and what they are not. Its worth a read! And don't skip the comments section on the article. Many posters had no problem with bailing out the banks, but railed against bank management officers who rarely or never face any serious charges.
When you look at it this way, the federal "Stress Tests", and Forced Closures (over 500 since 1998) imposed on US banks, large and small, was the right course of action when combine with holding our collecting noses and bailing out the big ones.
Its too bad the stress tests, measuring a bank's ability to withstand withdrawals, loan defaults, and deposit slow-downs from unemployed depositors, weren't imposed far earlier. Local and national Banks have learned at least part of the lesson, and are closing money losing branches at a record rate, in favor of ATMs and digital services.
(Score: 4, Insightful) by LoRdTAW on Monday May 18 2015, @01:30PM
An honest question here: how am I supposed to do this? Do I ask the local bank manager if the bank is trustworthy? Do I go to the CEO's office and ask to see his paperwork to ensure there is no lack of trust? What if the bank is lying? How do I give it a lie detector test? There is no litmus test and the bank's size does not guarantee that either.
The government can't vouch for the bank either as no one knows the real truth except for the bank. The only thing is the government can do is ensure the banks are held responsible and punished for lying or misdeeds. And we all know how that is working out.
(Score: 4, Insightful) by Anonymous Coward on Monday May 18 2015, @02:18PM
More than that: All these bootstrappy no-government neo-anarchists want every single person on the planet to (somehow) take responsibility for themselves and check that their bank is honest and trustworthy and competent. On the surface of it, that sounds reasonable. Of course, at second glance you realise that anyone who isn't particularly clever immediately becomes nothing more than financial shark-chow for any exploitative de-regulated motherfucker out there ready to scam them. This is where these social darwinists show their true colours, with statements like "too bad, sucks to be them" or "not my problem".
More to the point though, if we're taking responsibility for checking our banks, surely we should also be personally checking where our food comes from, since any kind of government regulation on food production is evil socialism. We also need to be individually verifying that our hospitals, doctors and pharmaceuticals are all suitable because, you know, socialism.
Right, so as well as being a financial genius, I also need a solid understanding of agriculture, medicine and biochemistry. And a couple of weeks per supplier of solid research time. That's not insane at all.
Then there's power, water, internet, housing, transportation, environmental health... it is the individual's responsibility to make sure that every one of these services is safe and trustworthy. I'll just go out and get a few more degrees. It's fine, I can do that after work, I only work 85 hours a week building up my own business, as every good bootstrappy self-reliant hardworking honest hardworking common sense down to earth hardworking honest patriotic american honest salt of the earth capitalist should. It's inhuman, in more ways than one.
(Score: -1, Troll) by Anonymous Coward on Monday May 18 2015, @10:17PM
there is some top notch ignorance going on here. no wonder the world has gone to economic shit
how do you know who's trustworthy? really?
fucking liberals
(Score: 2) by CirclesInSand on Wednesday May 20 2015, @08:28AM
How do you know which cars are safe? You read research by people who make it their business to do the research.
The GP isn't suggesting that you personally go in and audit the banks investment and lending practices. But if there are two banks: the first bank makes it's lending practices public and auditable, and gets good public reviews, and a second bank keeps these secret, who are you going to leave your money with? One bank makes its books public and guarantees 75% reserves. The other keeps its books closed and keeps 10% reserves. Who are you leaving your money with?
There are plenty of businesses and investors who will do this research for you. You just have to observe where they put their money. But when the government gets in bed with banks, you can't change to another bank, because the other bank is in bed with the same government. Choice really matters.
(Score: 2) by LoRdTAW on Wednesday May 20 2015, @11:42AM
You are missing the key part of my point: lies.
A car analogy is bad. You can't crash test a bank. A car is a physical product that can be tested by an individual and rated. I can buy one and take it apart down the the last nut and bolt to see if something is wrong or false claims were made. I can't walk into a bank, take it apart and see if something is wrong or misrepresented. A bank can be rated but only from what data the bank makes available. They might have good customer service, great rates, etc. But at any time can it come crumbling down after the robber barons are finished. And you won't see it coming, no one can.
(Score: 2) by CirclesInSand on Wednesday May 20 2015, @01:21PM
Banks can be audited. If a bank claims to have to have $45mil in deposits with 90% reserves, a private auditor can simply demand to see the $40.5 mil in cash. If a bank claims to be making safe loans, an auditor can demand the paperwork on $4.5 million in loans and audit them. A random portion of the borrowers can be contacted and checked out. Do you really think you can just lie about these things and auditors will take your word for it? You probably only have that impression due to auditors being government employees. Private insurance doesn't work like that at all.
Your impression that CEOs can just lie and everyone will believe them would be insulting, childish, and trollish if it wasn't for the fact that government involvement has made that true. But in private enterprise, people have their own money on the line, and manage it much more jealously than socialist central planners.
A bank may choose not to make an audit available, but that will affect their customers and insurance rates. And I doubt you can afford to take apart cars and inspect them. You rely on others to do that for you. So using the "I can't/you can't" argument is just dishonest, I made it very clear that I was talking about professional auditors.